State-by-state differences in Obamacare enrollment could affect rates

By By Noam N. Levey

May 01, 2014 | 5:38 PM

California, where 1.4 million people signed up for Obamacare, accounted for 1 in 6 people who signed up nationwide. Above, people stand in line at Panorama Mall to sign up. (Irfan Khan, Los Angeles Times)

WASHINGTON — Sign-ups for insurance through President Obama's health law varied widely across the country in the first year for the online marketplaces, according to a government report released Thursday that shows consumers flocked to coverage in some states but not in others.

These differences could exacerbate regional variations in premiums next year, with potentially steep rate increases for people in states with low enrollment.

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"While there is a lot of focus on the national numbers, it's what is happening state by state that will affect how much premiums rise next year," said Kaiser Family Foundation Senior Vice President Larry Levitt, an insurance expert. "Insurers set premiums based on who signs up in a state. If lots of healthy people enrolled in California, that doesn't spill over into Texas and help the risk pool there."

Enrollment, which began Oct. 1, did well in California, Vermont and Rhode Island, where more than 40% of each state's eligible residents enrolled. All three run their own marketplaces.

California, which had 1.4 million sign-ups, accounted for 1 in 6 people who signed up nationwide, according to the report from the Department of Health and Human Services.

Sign-ups lagged most in some smaller states — including South Dakota, North Dakota, Wyoming and Oklahoma — and in states that struggled to run their own marketplaces rather than rely on the federal government. These include Massachusetts, Hawaii, Maryland and Minnesota.

Altogether, 17 states enrolled less than 20% of those eligible to get coverage on the marketplaces, according to estimates from the Kaiser Family Foundation.

Contrary to expectations, a number of states whose elected leaders have fought the Affordable Care Act also recorded very high enrollment, including Florida, where nearly 1 million people selected a health plan.

In addition to affecting rates, the mixed enrollment picture may also widen existing disparities in Americans' health, depending on where they live.

Enrollment in Medicaid is already diverging as only about half the states have elected to expand their programs to cover most low-income residents, an option allowed by the law.

National surveys by Gallup show that the uninsured rate is falling three times faster in states that are expanding Medicaid and running their own marketplaces. Residents of communities that have higher levels of insurance coverage typically have fewer problems seeing the doctor and get more recommended medical care, research shows. They also tend to live longer.

"It doesn't matter how good the care in a particular state is. If people can't get in the door, they can't receive high-quality care," said David Radley, a researcher at the Commonwealth Fund, a nonpartisan foundation that has extensively analyzed regional variations in health systems.

The Obama administration and other supporters of the law celebrated the national tally, which topped 8 million through April 19, 1 million more than government projections.

The flood of sign-ups in late March and in the extended April enrollment period included many younger people, who were seen as essential to holding down premiums.

The report also indicates that national enrollment in Medicaid and the Children's Health Insurance Program increased by 4.8 million from Oct. 1 to the end of March, as low-income Americans signed up for the programs largely because of the Affordable Care Act.

"The final enrollment report proves that the ACA is a historic success," said Rep. Henry A. Waxman (D-Beverly Hills), a leading architect of the law. "We will never go back to a world where Americans can be denied health coverage or discriminated against because of a preexisting condition."

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The health law enables Americans who don't get coverage through an employer to select a plan on state-based marketplaces. Insurers must offer a basic set of benefits and can no longer turn away customers who are already sick.

Americans making less than four times the federal poverty level — or about $94,000 for a family of four — qualify for government subsidies in most parts of the country.

It remains unclear how many of the new enrollees have paid for their coverage, a point seized on by the law's critics. Obama administration officials said they would not have that information until later this year, although industry officials have put the payment rate at about 85%.

The bigger issue confronting many insurers is whether they have enough healthy customers to hold rates in check for 2015.

"To understand how premiums will be impacted next year, we need to look beyond national averages and focus on specific characteristics at the state level, including the health of enrollees in the marketplace, decisions on transitional policies, provider consolidation and the overall cost of care," said Karen Ignagni, head of America's Health Insurance Plans, a leading trade group.

Industry officials are most concerned about states where insurers continue to sell health plans that do not meet the new standards set out in the law.

These noncompliant plans, which aren't offered on the new marketplaces, tend to have healthier customers. That means the people who get health plans on marketplaces in these states tend to be sicker, creating a much riskier, more expensive pool.

A mix of healthy and unhealthy people on each state marketplace is necessary to balance risk and keep premiums in check.

About half the states, not including California, have allowed insurers to continue to sell these plans, an option Obama offered last year amid public outcry over the cancellation of many plans. Obama, while running for reelection, had repeatedly promised that people would be able to keep their insurance. Low enrollment in many of these same state marketplaces threatens to heighten problems with their risk pools.

Michael Hash, who heads the Office of Health Reform in the Department of Health and Human Services, expressed confidence that all states had enrolled sufficient numbers. "Premiums will be stable," he said.

The Obama administration has been working closely with industry leaders to ensure that premiums can be kept in check in select, high-risk markets, in part by using new programs in the health law that shift money from insurers with healthier customers to those with sicker ones.

Insurers in states with stronger enrollment — including Health Net Inc. and Blue Shield of California, two of the state's dominant carriers — nonetheless have been more upbeat about the premium picture.

"The most encouraging thing is the sheer number of people who enrolled," Blue Shield of California Chief Executive Paul Markovich said at an industry convention last week. "If the number is really big, they can't all be old and sick."

Markovich said the bigger threat to rates may come from the steady rise in medical costs.

WellPoint Inc., one of the largest carriers and whose Anthem Blue Cross subsidiary leads sign-ups in California, this week backed off earlier warnings about double-digit premium increases next year, reporting in a call with investors that a late surge of young customers had improved the company's risk pool.

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But an executive cautioned investors that rates could still increase substantially in some parts of the country.